Morning Brief: Inflation Drops To 5%; Curfew Imposed In Kashmir; Cabinet Nod To GST Council

Inflation Down

Retail inflation came down sharply to 5.05 percent in August from 6.07 percent in July. This was in significant part due to a sharp correction in food inflation, particularly in vegetable prices. CPI vegetable inflation dropped to 1.02 percent in August from 14.06 percent the month earlier. Pulses inflation also lowered from 27.53 percent to 22.01 percent. Overall food inflation saw a drop from 8.35 percent to 5.91 percent.

However, the Index of Industrial Production (IIP) figures disappointed. Industrial production contracted 2.4 percent, driven mainly by a 3.4 percent fall in manufacturing output. Mining and electricity also showed tepid growth at 0.8 percent and 1.6 percent, respectively.

Economists believe that these numbers call for a rate cut by the RBI in its next policy review scheduled to take place on 4 October.

Cauvery Dispute

Yesterday, the Supreme Court modified its order on the Cauvery river water sharing. It asked the Karnataka government to release 12,000 cusecs water per day to Tamil Nadu instead of the earlier dictated limit of 15,000 cusecs per day. However, this proved insufficient to quell the anger. Violence broke out in Bengaluru. Though the city remained peaceful for the most part, incidents of burning vehicles and vandalism by a few miscreants led to panic and then resulted in an undeclared bandh by the evening.

According to the Times of India, one person has been killed and five others have been injured after police opened fire on a rioting mob in north-west Bengaluru. Police have imposed curfew in some parts of the city.

GST Update

The Union cabinet has given its nod to the creation of the goods and services tax (GST) council, the central decision-making body that will finalise the design of GST, various rates and draft bills. The council will have the Union finance minister as chairman and state finance ministers as members. Its first meeting will be held on 22nd and 23rd of this month in New Delhi.

Livemint reported that the cabinet also approved the creation of the GST secretariat in New Delhi and appointing the revenue secretary as secretary of the GST council and the chairperson of the central board of excise and customs as a permanent invitee to the council. All expenses of the council will be borne by the central government.

Buffer Stock

The central government has decided to more than double the buffer stock limit for pulses from 800,000 tonnes to 2 million tonnes. This will cost the government Rs 18,500 crore. It would also allow it to intervene through open market sales whenever prices shoot up.

To crackdown on the huge difference between loose dal and those sold in packets, the government had earlier modified the packaged commodities rules enabling state governments to fix retail prices of essential commodities.

Curfew In Kashmir

For the first time in 26 years since the onset of terrorism in 1990, there would be no Eid gatherings at Idgah and Hazratbal shrines in Kashmir. Curfew has been imposed in the valley. The decision came after a call by the separatists for a march to the Srinagar office of the UN. The government has ordered a complete shutdown of internet services of all telecom networks and mobile telephony except BSNL for the next 72 hours.

MUST READ OP-EDS

A New Tool In The Policy Toolbox: The recent news that the government think tank Niti Aayog could be setting up a behavioural economics unit is welcome as it could greatly aid the government to overcome social obstacles in policy implementation.

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We hope you enjoyed reading our morning brief. Have a great day ahead!

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